COMMENTARY

jUNE 21, 2014 vol xlix no 25 EPW Economic & Political Weekly
12
What Future for the Media
in India?
Reliance Takeover of Network18
Paranjoy Guha Thakurta
This article was earlier posted on EPWs
Web Exclusives Section.
Paranjoy Guha Thakurta ([email protected])
is an independent journalist and educator.
Indias largest company now
controls Indias largest media
conglomerate. The countrys
media could therefore well be
perceived henceforth to be a
little less independent or, for that
matter, trustworthy.
T
he decision by Reliance Industries
Limited (RIL) to wrest full mana-
gerial and editorial control over
the Network18 group was not unexpec-
ted given the fact that two and half years
ago, RIL, the countrys biggest privately-
owned company, had invested heavily in
Network18, Indias biggest media organ-
isation after its virtual amalgamation
with the Eenadu group. The countrys
richest man, Mukesh D Ambani, is now,
formally, also Indias biggest media
baron. However, what took some by sur-
prise was the speed with which the core
team led by the Network18 groups prin-
cipal promoter Raghav Bahl quit rath-
er, was ousted within a fortnight of the
declaration of the results of the general
elections on 16 May.
Rationale
The Reliance group seeks to explain its
decision to take over the Network18
group as a move driven by synergy since
it intends becoming a major participant
in the fourth-generation (4G) high-speed
data transfer business, at a time when
technological convergence has blurred
the distinction between telecommunica-
tions and broadcasting. At the same time,
what Reliance has achieved by becom-
ing the biggest player in Indias mass
media industry is that it has enhanced
its ability to inuence public opinion
through the media, thereby also stren-
gthening its hold over the working of the
countrys political economy. At present,
the Network18 group is the largest media
conglomerate in India, bigger than the
Bennett Coleman/Times group and the
STAR group which is part of Rupert
Murdochs media empire.
The consequence of RIL strengthening
its association with Network18 is a clear
loss of heterogeneity in the dissemina-
tion of information and opinions. Media
plurality in a multicultural country like
India will diminish. In particular, the
space for providing factual information
as well as expressing views that are not
in favour of (or even against the inter-
ests of) Indias biggest corporate con-
glomerate will shrink, not just in the tra-
ditional mainstream media (print, tele-
vision and radio) but in the new media
(internet and mobile telephony). There
is growing concentration of ownership
in the countrys already-oligopolistic
media markets. In the absence of restric-
tions on cross-media ownership, these
trends will inexorably lead to the con-
tinuing privatisation and commodica-
tion of information instead of making it
more of a public good that could bene-
t larger sections of society, in particular
the underprivileged.
On 30 May, an announcement was made
by RIL to the Bombay Stock Exchange
that the companys board of directors
had approved an additional investment
of Rs 4,000 crore in an entity named
Independent Media Trust (IMT) to acquire
the properties of the Network18 group.
Within days, those associated with Bahl,
including his wife Ritu Kapur, his sister
Vandana Malik and his close condantes,
including chief executive ofcer B Sai
Kumar, chief operating ofcer Ajay Chacko
and chief nancial ofcer R D S Bawa,
had put in their papers.
As Bahl and Ritu Kapur ended their
entrepreneurial leadership, they wel-
comed Mukesh Ambani and RIL as the
potential owners of Network18 and
assured employees
Believe us, the group (Network18) is in ter-
ric hands. Mr Ambani is a visionary and a
truly good human being. And, we have no
doubt Network18 will soar into the cloud
under this dispensation. All of you have
very good cause to be excited and optimi-
stic about the future...God bless you and God
bless Network18.
Acquisition Process
The story of RIL acquiring control over
Network18 began in late-2011. Network18
had a consolidated debt of nearly Rs 1,400
crore on its books at the end of the year
COMMENTARY
Economic & Political Weekly EPW jUNE 21, 2014 vol xlix no 25
13
and was looking for a white knight to
bail it out. Bahl was not alone in this
regard. Promoters of a number of major
media groups, including Aroon Purie (of
the Living Media group) and Prannoy
Roy (of New Delhi Television), were
desperately looking for investors in the
wake of the worldwide recession and
the economic slowdown in India that
brought about a squeeze in expen ditures
on advertising and marketing services,
the proverbial nancial oxygen of
commercially-run media companies. What
compounded the crunch for traditional
media organisations and completely dis-
rupted their business models was the
rapid spread of the internet that made
(and continues to make) increasingly
large volumes of media content almost
free to those with a computer and in-
ternet connectivity.
It was against this backdrop that in
January 2012, RIL announced that it was
entering into a complex, multilayered
nancial arrangement that involved selling
its interests in the Hyderabad, Andhra
Pradesh-based Eenadu group founded
by Ramoji Rao to the Network18 group
and also funding the last-named group
through a rights issue of shares. TV18
Broadcast a company in the Network18
group stated that its board of directors
had approved an outlay of up to Rs 2,100
crore for the proposed acquisition of the
Eenadu groups television assets through
IMT which would fund the acquisition of
shares in Network18 and TV18 through
rights issues. The two entities went on to
raise approximately Rs 4,000 crore, in-
cluding Rs 1,700 crore from its promoters.
(For a detailed analysis of this arrange-
ment, see Corporatisation of the Media
EPW, 18 February 2012, by Paranjoy
Guha Thakurta and Subi Chaturvedi.)
RIL had earlier acknowledged in the
High Court of Andhra Pradesh that its
investments in Ushodaya Enterprises,
the holding company of the Eenadu
group promoted by Ramoji Rao (credited
with playing an important role in the rise
of the late N T Rama Rao as chief minister
of Andhra Pradesh and thereafter, his
son-in-law N Chandrababu Naidu). A
petition had been led in the court by the
widow of former Andhra Pradesh chief
minister belonging to the Congress, the
late Y S Rajasekhara Reddy, Y S Vijaya-
lakshmi (who was then a member of the
state legislative assembly). The petition
had alleged that RIL had bailed out
Ramoji Rao when his family-owned chit
fund, Margadarsi, was in trouble and
facing various inquiries (from, among
others, the Reserve Bank of India).
Outlook (16 January 2012) suggested:
RIL bailed out Eenadu TV (ETV) after a deal
between Ushodaya and private equity inves-
tor Blackstone was scuppered by the then
Andhra C M Y S R. Investment banker Nimesh
Kampani of J M Financial then pumped in
Rs 2,600 crore (he was hounded by Y S R
for his efforts). In 2008, ETV was transferred
to RIL.
RIL denied these allegations in court.
However, its association with the Eenadu
group raised quite a few questions.
Financial analysts wondered whether
the deal entailed RIL buying back its
own assets, thereby raising issues of cor-
porate governance and incomplete dis-
closure of information to shareholders.
All these questions and doubts have to-
day been relegated to the history books.
Political equations have changed in the
now-bifurcated Andhra Pradesh with
Naidu back in power and RIL taking full
control over both the Network18 and the
Eenadu groups.
The January 2012 deal provided for RIL
to get preferential access to the content
as well as the distribution assets of both
media groups. RIL had stated then
that Infotel (now a part of Reliance Jio)
was setting up a pan-India world class
fourth generation broadband network
using state-of-the art technologies...to
take leadership position in content
distri bution through broadband tech-
nology through a host of devices. RIL
added that it would access digital content
on entertainment, news, sports, music,
wea ther, education and other genres
from Network18 and that this was one
of many partnerships being undertaken
by the company.
Even at that time, the Reliance group
had sought to assuage apprehensions
that RILs association with Network18
would exert an inuence on the latters
editorial policies. Identical statements
issued by both groups stated that funding
from RIL would not alter promoter,
management or editorial control of
Network18 entities. In its media release,
RIL had stated:
...Bahl and his team will continue to have
full operational and management control of
both the companies...Bahl and the current
promoter entities of Network18 and TV18
will continue to retain control over Net-
work18 and TV18...
It is now clear that the real boss of
the Network18 is no longer Bahl but
Mukesh Ambani.
In May 2012, the Competition Com-
mission of India had made it apparent
that the zero coupon optionally conver-
tible debentures issued to facilitate the
deal could be converted into equity
shares at any point of time within a
period of 10 years which would result
in RIL and entities owned and control-
led by it acquiring over 99.9% of
the shareholding in companies in the
Network18 group.
Network18 and Eenadu Empires
The Network18 group owns television
channels such as CNBC-TV18, CNN-IBN,
CNBC Awaaz, IBN7, IBN Lokmat and
Colors, websites like Moneycontrol.com,
Firstpost.com, In.com, IBNLive.Com,
Cricketnext.in, Bookmyshow.com and
Homeshop18 (a television-cum-internet
venture), besides printed magazines such
as Forbes India and Overdrive, among
other media and non-media properties.
Many of these dominate their respective
market segments, in particular, the seg-
ments providing news about shares and
other nancial instruments as well as
the activities of corporate entities.
Eenadu is the most widely-circulated
newspaper in the Telugu language. The
Eenadu group runs both news and
general entertainment television channels
in Andhra Pradesh, Telangana, Uttar
Pradesh, West Bengal, Maharashtra,
Karnataka, Odisha, Gujarat, Madhya
Pradesh, Chhattisgarh, Haryana, Bihar,
Jharkhand, Uttarakhand and Himachal
Pradesh in various languages includ-
ing Telugu, Kannada, Hindi, Bengali,
Marathi, Odia, Gujarati and Urdu.
(Over and above the media, the group
headed by Ramoji Rao has interests
in chit funds, processed foods, besides
the production and distribution of
feature lms.)
COMMENTARY
jUNE 21, 2014 vol xlix no 25 EPW Economic & Political Weekly
14
In short, the media conglomerate
which is now owned and controlled by
the Reliance group will have its footprint
spread not only across the length and
breadth of the country, but also across
different genres of news and entertain-
ment. As RIL itself stated in its 30 May
ofcial statement:
The acquisition (of the Network18 group)
will differentiate Reliances 4G (fourth-
generation telecommunications and high-
speed data transfer) business by providing
a unique amalgamation at the intersection
of telecom, web and digital commerce via a
suite of premier digital properties.
Complex Deals in TV18
Over the years, as Bahl expanded his
business operations, the journalist in him
took a backseat. (In the interest of trans-
parency, it is being disclosed here that the
writer of this article was employed by
the TV18 group as features editor and
anchor between October 1995 and
March 2001 and thereafter, was a con-
sultant with the group till December 2001.)
In more ways than one, his corporate
conglomerate started resembling the busi-
ness empire founded by the late Dhirubhai
Ambani in terms of its structure. Like the
Reliance group, the Network18 group set
up dozens of companies, including some
in tax havens like Mauritius, with com-
plicated cross-holdings of shares.
Like the Ambanis, Bahl and his
associates struck multilayered deals that
often concealed more than what was
revealed. Closely-held companies were
used for this purpose. For instance, IMT
subscribed to debentures in RB Media-
soft, RRB Mediasoft, RB Media Holdings,
Aventure Marketing, Watermark Infratech
and Colorful Media, all of which were
controlled by Bahl.
As Rahul Bhatia, who writes for Caravan
monthly and who has examined the
balance sheets of Network18 group com-
panies, pointed out in the magazines
website on 3 June:
...the operations and balance sheets of these
companies merged and detached often,
allowing the companys management to
value assets in ways that were lawful but
nonetheless confounding to outsiders... One
feature of these exercises was the convo-
luted issuing of equity: a large restructur-
ing in 2011 left small investors furious, and
analysts wondered how the company had
allocated debt during an earnings call....
Other vagaries of accounting were appar-
ent in the footnotes of the companys public
documents. For instance, it acknowledged
hiding losses over Rs 650 crore in a footnote
on page 82 of its 2013 annual report, using a
method that, accountants told me, would
give them pause...
Bhatia added that certain corporate
entities controlled by Bahl loaned large
sums to a trust that purchased Net-
work18s shares in questionable transac-
tions. He wrote:
Capital owed between his public compa-
nies and private companies in tax havens,
disappearing and appearing in the ne print
of these companies nancial reports. The
transactions his companies undertook were
so many, and so complicated...
Well before the results of the elections
were known, Bahl had openly supported
Narendra Modis candidature as prime
minister. In April 2013, the then head of
Network18 had personally anchored a
Think India Dialogue featuring Modi.
On that occasion, the then chief minister
of Gujarat had made a few sarcastic com-
ments about the Planning Commissions
nancial support to tiger conservation
projects, alluding to Network18s rival
group, NDTV. This is a verbatim account
of what Modi said during his public
conversation with Bahl:
Planning Commission mein charcha hui,
Tiger ke liye 200 crore rupaiye diye, bharat
sarkar ne diye. Shayad woh NDTV usise chalta
hai. Mujhe pata nahin... (There was a discus-
sion in the Planning Commission on tiger
conservation. The government has allotted
Rs 200 crore for this. I dont know if NDTV
also runs on this money.)
Modi then went on to wonder if the
Planning Commission thought tigers
were secular and lions (which Gujarat
has in sizeable numbers) were commu-
nal, to general mirth among those
assem bled in the audience. Sources in
NDTV have told this writer that its Save
the Tiger campaign on its television
channel was sponsored entirely by
private companies and no money was
received from any government agency.
After Reliance invested in Network18,
the group downsized drastically. In
August 2013 alone, the group summarily
sacked over 350 employees in a matter
of less than a week. In the past too, the
group had asked many of its employees to
resign because its expansion plans
failed to fructify. Over the last year or
thereabouts, the nances of most com-
panies in the group had shown distinct
signs of improvement, with debt on
the decline and protability on the rise.
But that did not stop Mukesh Ambani
from stepping in to take full charge of
the media groups operations with his
trusted condantes.
After the Elections
As the elections were taking place, there
was considerable speculation about the
future of certain prominent anchors on
television channels owned by the group.
When the outcome of the elections were
known on 16 May and it became clear
that Modi would become prime minister
and the Aam Aadmi Party (which had
publicly criticised Reliance and Mukesh
Ambani) would not have even a handful
of MPs in the Lok Sabha, rumours about
the imminent takeover of Network18
intensied. As subsequent events indi-
cated, the speculation was indeed based
on fact.
Was RILs formal takeover of Network18
a hostile one, as certain reports have
suggested? Perhaps, in a strict sense of
the term. But many would argue that
Bahl should have read the writing on the
wall, that what took place should have
been anticipated by him.
As for the IMT, its existence is
now truly redundant in the new
scheme of things. As an editorial in the
thehoot.org website, which tracks the
media, put it on 31 May: Whoever
thought up the name had a delicious
sense of irony.
For, from now onwards, a large sec-
tion of the media in India could well be
perceived to be a little less independent
or, for that matter, trustworthy.
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